|
The Metro open space program has acquired more than 30 miles
of land along streams and rivers, says Metro's Jim Desmond.
A recent Metro study found that 75 to 85 percent of all
vertebrate species rely on riparian areas that exist along
waterways.
According
to Metro, bond money from Ballot Measure 26-26 funds 17
full-time employees, including real-estate negotiators and
legal and other staff. So far, $3 million has been spent
on salaries.
Some
properties Metro acquired had houses on them. The agency
now serves as landlord on 12 homes. Their rents, set by
residential appraisers, produce $19,375 in monthly revenue.
Both John Desmond (top) and Mike Burton (below) say Metro's
open space program is working just as planned. But a draft
report by Metro Auditor Alexis Dow raised serious questions
about appraisals used by the agency.
Ballot
Measure 26-26 was billed as buying "future parklands," but,
other than $25 million to local cities and counties, its
proceeds were not allowed to be used for park development.
With
no organized opposition, Ballot Measure 26-26, endorsed
by Willamette Week, won on a mail-in ballot in May
1995, with 62 percent of the vote.
Spearheaded
by former Metro Councilor Patricia McCaig, the campaign
spent about $431,000, much of it on mailers and political
ads.
Top
contributors
to the campaign included The Nature Conservancy at $50,000,
John Sherman, then-head of Friends of Forest Park, at $21,000,
and Trust for Public Lands at $15,000, as well as large
garbage companies regulated by Metro. There were also plenty
of developers, real-estate brokers and landowners.
|
|
Doing
the Math: a map of how landowners are profiting off of
Metro.
On the edge of Oregon City, a narrow street zigzags up a hillside
past ramshackle homes and '60s-era pickups parked in front
yards. It eventually stops at Canemah Bluff, a 39-acre stretch
of rolling ground where basalt bedrock pokes from shallow
topsoil in jagged outcroppings, shadowed by tall oaks, firs
and cedars.
"It's the jewel of Oregon City," says Jim Desmond, head
of Metro's open space acquisition division, as he gazes
off the edge of the peaceful bluff at the teeming suburb
below.
For some, like Desmond, this land is heaven. For others,
this is a case study in how the tri-county agency he works
for has given away taxpayer money for the past four years.
In 1996 developer Don Oakley bought the Canemah Bluff property
for $713,000. Just 18 months later, he sold the same 39
acres to Metro for $2.85 million, four times what it cost
him. The agency justified the sale price with a remarkable
appraisal, one that claimed the land to be worth $716,000
more than even Oakley's detailed calculations of the land's
value if fully developed.
It's a safe bet this was not what most voters envisioned
in May 1995, when the people of greater Portland voted to
let Metro borrow $135.6 million in bonds to buy open space,
habitat and future parklands.
Voters were persuaded by a campaign that stressed accountability.
The message: Give Metro your money, and you'll get good
value in return.
In many ways, Metro has lived up to its promise over the
past five years. It's purchased 177 pieces of land comprising
5,530 acres, including sensitive stream areas, trails and
future regional parklands.
But a five-week WW review, including dozens of interviews
and stacks of real-estate files, found an agency so anxious
to secure land that it has streamlined fiscal controls,
creating a process that allows even overpriced land to look
like a good deal. In 16 out of 32 real-estate acquisitions
reviewed by WW, the land values determined by Metro
appear inflated, and the combined cost to taxpayers could
easily run in the millions.
While few members of the public are aware of the controversy
over Metro's purchase prices, it is well known to Portland
real-estate appraisers, as well as many brokers, farmers,
planners and developers.
"Most of the properties I've looked at, the prices didn't
make sense," says Tom Harris, a Redmond appraiser who worked
with the program in Portland early on. "You can't condemn
the whole system...but there are some pressures there that
have forced a perspective that is totally out of line with
the market."
It's hard to argue with the intent of the greenspaces program.
For most people, the need to preserve natural areas for
future generations is unquestioned. Since the 1995 measure
passed with 62 percent of the vote, it's been lauded by
local environmentalists and drawn interest from across the
country. "I think they've done a great job of acquiring
exactly what we had all hoped would be acquired," said Mike
Houck of the Portland Audubon Society, who has worked closely
with the open space program. "In general I think they've
done a hell of a good job."
Mike Burton, Metro's elected executive, says, "I get phone
calls from cities and counties from all across the country,
asking how in the heck are you doing this, that they are
shocked that we're buying this many properties this fast."
The program, said Burton, is a "very tightly controlled
one to make sure that your money is being spent properly."
Indeed, at the start of the open space acquisition program,
controls were put in place to try to ensure that the public
got the most bang for its buck.
On Oct. 15, five months after the measure passed, Metro
hired Desmond, a former lawyer, to head the program. A short
man with a pleasant manner, Desmond had worked for Trust
for Public Lands, a nonprofit group that specializes in
acquiring land for resale to government agencies.
His job: to oversee a staff of several real-estate negotiators
who approach landowners and try to get them to sell their
property. If a tentative purchase price can be established,
Metro hires an outside real-estate appraiser to determine
if the land is worth that price.
That's where, in the Metro process, things get interesting.
Real-estate appraisers analyze a piece of land by looking
for its strengths and weaknesses and comparing it to similar
properties. Then they calculate what they believe to be
fair market value based on the most profitable type of development
realistically possible.
In early January 1996, to guard against sloppy appraisals,
Metro hired its own staff appraiser, Kris Hartley. In short,
her job was to watchdog Desmond's unit so taxpayers didn't
get screwed. To ensure independence, she reported to Metro
General Counsel Dan Cooper.
Hartley had a reputation for integrity. Five years earlier,
Gov. Barbara Roberts named her to the newly created Oregon
Real Estate Appraisal Commission, intended to root out appraisal
fraud and enforce professional standards. "She was very
good," says Stephen Pio, a Portland appraiser. "She cared
about appraisals that were well done and documented properly.
Not all [appraisers] are like that."
Almost immediately after Hartley began, there was friction.
Citing a confidentiality agreement, Hartley won't discuss
specific Metro purchases, but memos in Metro files reviewed
by WW show that she found some deals contemplated
by Desmond's unit to be highly questionable.
For example, in 1996, Metro wanted 19 hillside acres near
Terwilliger and Barbur boulevards called Marquam Woods.
Trust for Public Lands, which had an option to purchase
the property, provided the agency with an appraisal claiming
the land was worth $1.8 million. Hartley pointed out several
flaws in the appraisal and ordered another one be done for
Metro. That appraisal pegged the value at $1.2 million to
$1.4 million. Metro paid $1.4 million.
But Hartley couldn't stop all questionable deals.
"There were huge problems," Hartley told WW. "It's
my opinion that there were early acquisitions that occurred
at numbers that didn't have strong market-based support."
By November 1996, after Hartley had raised questions about
several appraisals submitted to Desmond, some at Metro began
to view her as an obstacle to the open space program. That
month, Burton addressed about 45 local members of the Appraisal
Institute, a professional organization. Witnesses say Burton
made a disparaging comment that clearly referred to Hartley,
his appraisal watchdog. According to the Institute's newsletter,
Burton's presentation that day "indicated frustration at
the fact that appraised market value is often times lower
than the price Metro is willing to pay. 'I want to get that
property,' he explained."
Asked about the article, Burton questions the account;
he denies slighting Hartley.
In any case, on Dec. 2, Hartley left the program for Eastern
Oregon, where she now shares an office with appraiser Tom
Harris. Her old job "was a bad fit from the get-go," she
says, and "was not complementary to my beliefs, both personal
and professional.... Out of fairness to the taxpayers, a
good look needs to be had."
Desmond, for his part, insists his program has run smoothly.
When asked about Hartley's comments, he said, "I don't know
what you're talking about."
In January 1997, a month after Hartley's departure, the
Metro Council authorized changes to the greenspaces program
that reduced the independence and authority of the staff
appraiser position, thus eroding the checks and balances
that had earlier marked the program.
Asked why, Burton denies the changes shifted authority
to Desmond or weakened fiscal controls.
But a close read of the changes suggests otherwise. Previously,
Hartley reported to Metro counsel Cooper to preserve her
independence from Desmond. She had the last word on a property's
true market value. But Metro's new work plan says Desmond
now has "discretion" to select among three options to determine
a property's final value. If the staff reviewer disagrees
with an outside appraisal, for example, the program's revised
work plan says Desmond can direct the reviewer to "work
with" the outside appraiser until the two agree. Says Hartley,
"In my opinion, it transferred authority over the review
process from Cooper to the open space manager."
Another change in the work plan said appraisers for Metro
"may be instructed to make any assumptions or valuations
that best reflect the specific market conditions affecting
the property and the value of the property to Metro in
particular." [Emphasis added]
Prior to this, Metro could only ask that appraisers value
property using their best professional judgment. Now, however,
assumptions could be factored in to appraisals to reflect
"the value of the property to Metro in particular."
Asked about the change, Desmond says he has never invoked
this clause.
Then again, he may not have needed to.
Asked what Metro's reputation is as a client, Roger Anderson,
a Portland appraiser who has worked for the greenspaces
program, says that his sense is that Metro wants the appraisers
to err on the side of the seller. In other words, he says,
"When you've got a gray area, give the benefit of the doubt
to the property owners."
That's problematic, according to Barton DeLacy, another
Portland appraiser. "What you don't want is sort of this
under-the-table pressure on the appraiser to set a value
that may be artificially high," says DeLacy, who worked
on a couple of purchases with Metro early on. "We got that
sometimes from the people at Metro.... If that's happening
consistently, then maybe the appraisals aren't accurate."
Desmond denies exerting any pressure regarding values,
and most appraisers who've worked for Metro agree. But half
the appraisals WW reviewed contained red flags.
In some cases, Metro purchased the land at prices that
far exceeded what the seller had paid, even factoring in
inflation and the rising value of land (see map, page 24).
In other cases, Metro's purchase price for property appears
screwy only when you look deeper at the assumptions employed
by the appraiser, which consistently seems to favor the
seller.
Interestingly, there have been allegations of misspending
from the program's inception, leading the elected Metro
auditor, Alexis Dow, to begin an audit of the greenspaces
program in late 1998. Several months ago, a highly
critical draft audit was completed and delivered to Metro
officials, including Desmond and Cooper.
In November 1999, WW requested a copy of the draft
audit. Dow complied but, citing an exemption in Oregon's
Public Records Law, blanked out large portions of the public
document.
The draft was based in part on reports produced by Dean
Potter, an appraiser who sits on the Washington state Appraiser
Advisory Committee. Dow had hired Potter to review the appraisals
for six land acquisitions by the greenspaces program. WW
then requested and received copies of Potter's reports.
Dow again blanked out portions of the documents.
Although the reports obtained by WW are incomplete,
they still paint a damning picture. Potter noted questionable
assumptions, omissions or other discrepancies in appraisals
in all six acquisition files he looked at.
In 1997, for example, Metro purchased 148 acres of riverbank
property between Portland and Scappoose from Charles and
Connie Hegele. In 1995, an appraisal done for the Nature
Conservancy had deemed the property worth no more than $450,000
because, it explained, the land was in a flood plain and
too expensive to build on. Metro's appraisal, however, surmised
that you could build seven homes on the property, thus jacking
up the value to $650,000. This assumption was based on a
subdivision plan that Potter calls "an exercise in speculation."
Despite that, the Metro Council bested the appraised value
and paid the $750,000 the Hegeles were asking. Tom Harris,
who did the appraisal for the Nature Conservancy, told WW
he finds Metro's purchase price "incredible."
Also in 1997, Metro sent an appraiser to look at 3.3 acres
in Forest Park. At the time, the property could not be developed
because of its environmental protection zoning. The appraiser
concluded that the city might be persuaded to remove the
zone and allow one homesite. As a consequence, he valued
the land at $37,000. Not satisfied, Metro staff directed
the appraiser to do it over again--this time assuming three
homes were possible. Potter noted that Metro staff based
the directive on a city planner's memo that "clearly does
not indicate the subject has an outright potential for any
development." But the optimistic assumption was used to
justify a final appraised value of $161,000. Metro eventually
bought it for $168,000, more than 10 times what the owners
paid for it in 1989.
The pro-seller bias in some Metro appraisals has continued
to the present day. In November 1999, Metro paid Fred Hanson
$1.5 million for 54 acres on the west bank of the Willamette
River in Clackamas County. Only one homesite had been approved,
and steep slopes, restrictive zoning and an irregular parcel
shape made developing another homesite an open question.
Metro's outside appraiser, however, valued it assuming it
could accommodate two homesites, based on a letter written
by land-use lawyer Larry Epstein.
Though Epstein was hired by Metro, the letter reads as
though it were written for the benefit of Hanson, not taxpayers.
"Recognizing Mr. Hanson's lofty aspirations for the properties,
I have construed the facts and ambiguous or discretionary
provisions of the relevant county land-use laws liberally
in his favor," wrote Epstein. "That is, I have given Mr.
Hanson the benefit of the doubt when I had a doubt about
the potential use of the properties." As for Epstein's conclusion
that two homesites were possible, the lawyer conceded in
his letter that he lacked pertinent facts, got contradictory
advice from county planners and lacked time and budget,
so "A more detailed analysis...could change that conclusion."
Despite the questions raised by Potter's review and WW's
reporting, informed sources say that after Dow distributed
her initial critical audit to Metro officials something
happened that caused her to change her tune. Dow is now
poised to release a final audit that is far less stinging.
When asked about the new audit's findings, Dow declined
to comment, but said revision is a normal part of the process.
In fairness, it should be noted that on many properties,
Metro has driven a hard bargain with sellers, refusing to
pay more than market value. It also should be noted that
open-space type properties are often the most difficult
to evaluate, appraisers say.
And yet, it's clear that many Metro appraisals are coming
in higher than the land would actually sell for on the market.
Why? Officials would have two possible motives.
First, higher appraisals make deals go faster and smoother,
and some say the bureaucratic dynamic under Desmond stressed
getting the deals done. Every year the Metro Council gave
his program yearly acreage and spending goals to hit, and
former employees, speaking on condition of anonymity, say
they felt pressure to buy land. "There was a lot of tension
to do [acquisitions]," says one ex-employee, citing a feeling
that "We've got to spend this money."
The second reason, some say, may be that a high appraisal
shields elected officials at Metro from the appearance that
they are being loose with the public purse. The rules require
any greenspaces purchase that is 10 percent more than the
appraised value to go to a Metro Council meeting for a public
vote. Since August 1995, Metro has purchased 177 properties.
Only 14 needed council action for price reasons.
DeLacy, the Portland appraiser, says that elected officials
are often willing to pay more than market value for land--but
don't want the controversy. The motive for boosting the
appraisals, he says, could be that "you're not taking any
political heat, because you're paying the appraised value."
The Audubon Society's Houck is skeptical that overpayments
are going on. As of Dec. 1, the agency had achieved 86 percent
of the bond measure's goal, 6,000 acres, but spent only
74 percent of its money. If the agency is paying too much,
Houck asks, how could that be?
The answer may be that Metro has acquired most of its land
outside the urban growth boundary, where land is far cheaper
because intensive development is not permitted. Metro has
spent almost $40 million on 929 acres inside the growth
boundary to date, and almost $39 million on 4,614 acres
of land outside the UGB.
Although the terms of the 1995 bond measure allow Metro
to purchase rural land, many of the campaign's supporters
thought it was aimed at rescuing properties imperiled by
development.
Michael Velott gave $7,500 to the bond measure campaign.
A Pennsylvania developer who has done several land deals
in the region, Velott says he is shocked by Metro's level
of spending outside the UGB. "It bothers me because it makes
no economic sense," he says. "The value of land outside
the boundary is not escalating. It couldn't be developed."
Desmond's boss, Charlie Ciecko, takes issue with this view,
saying that the open space program is doing exactly what
it is supposed to do. After the bond measure's passage,
Metro crafted "refinement plans" for 14 target areas, and
that's where Metro is spending its money. "The UGB has not
been an issue for us," Ciecko said.
Nevertheless, it might seem odd to some that Metro is making
some purchases that actually take farmland out of production.
Last September, Metro stunned Washington County rancher
Ed Bartholamy by buying a neighboring 16-acre parcel for
$325,000, way over what he thinks it was worth. "The parcel
next door was farmed for 150 years; and, for the first time,
it's not being farmed," says Bartholamy, who had been eyeing
the property. "The Metro purchase makes it impossible to
expand our farm.... We're just scratching our heads."
|
